What Do You Know About Groups for Group Health Insurance Plans?

The future of health insurance looks pretty scary these days, especially if, like us, you’ve been buying insurance through the Affordable Care Act.

Like a lot of people, we’re weighing our future options. Should one of us end our semi-retired status and go look for work with benefits? Try to combine a catastrophic plan, a medical discount card and a Health Savings Account? Explore Health Sharing Ministries?

Insurance Explained

Let’s first go over the basics. The premise of insurance is that most of the time, you are purchasing protection from a large financial loss that you could not cover from your own resources. That infers that most of the time, most people should be paying more for insurance than they collect so that a few people can collect more than they pay.

The first insurance covered shipping. A merchant would pay a bit to make sure that if a ship was lost, their entire fortune wasn’t. Since most ships (and their cargoes) didn’t fall victim to storms or pirates, financiers were willing to make up for the ones that were.

Merchants didn’t really want to use their insurance. They made far more when their cargoes reached their destinations. Still, shipwrecks and pirates happened, and it was better to get back enough to pay for another cargo and try again.

The merchants gambled, pretty much, as did the insurers. And that’s still the case with car insurance or homeowner’s insurance. You don’t expect that you’ll crash your car this year, or that your home will burn down. But you pay for the insurance just in case.

The Problem with Health Insurance

Only now we have health insurance, and health insurance covers so much that people really don’t use it as insurance anymore. People buy health insurance with the full intention of using the benefits, and they don’t just want to use it to cover big stuff, like hospitalization. To make the math work, though, most people still have to use less than they pay.

So how does that work? Well, companies have to guess how much insurance you’ll use, and then try to charge you more than that. If it’s just you, that can get pretty expensive, especially if you have some risk factors. So unless you have very few risk factors, you’re better off if you’re part of a group with varying risk factors, spreading the risk around.

Young and healthy people will overpay most of the time, relative to their benefits. Sick folks, not so much. And since the health insurance company wanted to make money on all their policies, group policies were lower risk and less expensive. The bigger and more diverse the group, the better, because there’s less chance of the pool getting overwhelmed with people who’ll receive more than they pay.

So employers, especially large diverse employers, traditionally got the best rates, and individuals got the worst.

That’s what the healthcare exchanges, fines, etc were supposed to do: put all the folks who bought individual insurance into what were effectively group policies with group rates. Oh, they were doing other things too, like providing subsidies to keep out of pocket costs down. But mostly, the exchanges tried to create bigger groups to spread the risk around.

Now, those group rates we’ve been getting may very well go away. We need to find a new group.

Why We Might Want a Group Health Insurance Plan

There have been some ways for folks who didn’t have employer-sponsored health insurance to get group rates, and mostly they’ve been wrapped around joining professional groups. For instance, when I worked at a bookstore, we discussed several times joining the American Booksellers Association so we could provide health insurance. It never got past the “shoot the sh!$@” phase, but we knew it as an option.

Yeah, not an option anymore.

Other organizations have plans too. So if you’re a member of AARP, you can buy a Medicare supplement plan through them and enjoy a group rate. But they don’t seem to offer much in the way of group health insurance plans for their younger members.

Seems like a real membership growth opportunity for them.

But I also wonder what other options there are for our family and for other folks who don’t have employer-sponsored coverage but don’t qualify for Medicaid or Medicare. Are we out in the cold, or will new options open up for us if the individual market gets compressed?

Or do we need to start making a solution?

Seeking Information

So I went poking around for information about being part of a group insurance plan.

It’s pretty hard to find anything about group insurance right now unless you’re looking for employer health insurance. I did see something for Costco, but not in my area. Most other information (at least that I could find in a half hour of search) seems to predate the ACA.

Still, it’s an interesting possibility, and I wonder if someone who knows a bit more about the insurance industry can tell me.

Are there reasonable group plans for early retirees/semi-retired folks like us? Where would we find them, and how do folks qualify?

What are the requirements to be an operational group for group health insurance purposes? (Not just something that calls itself a group, but would get underwritten as a group?)

I know finding or creating a group sounds a bit like a pipe dream, and maybe it is. But with insurance moving the way it’s moving, non-employer group health insurance may be the way to keep FIRE dreams alive.

I wish I knew this answer, but I love your thinking. Maybe we need a FIRE group plan. 😉 We’re all focused on being healthy, right? So we should be a relatively low-risk group on the whole.Our Next Life recently posted…Staring Into the Early Retirement Health Care Abyss

Wouldn’t that be nice? I figure that most groups need to be either fairly big or geographically centralized. FIRE and the financial blogger group isn’t centralized, but big enough? Maybe bloggers in general?

Totally on-board for learning more about this too. We are all set with insurance for the next 6 years (thank goodness)…but I will have almost a 10 year gap with no employer plan before Medicare. Hopefully we’ll have some better options by then!Vicki@MakeSmarterDecisions recently posted…Make Smarter Decisions – Saturday Share Day 2017, Week #10

Next 6 years is good, but 10 years between is pretty scary (and assumes that Medicare doesn’t change too much.)

My biggest hope when I see all these plans from the GOP is that they look so bad there’s a single-payer backlash. As it is, nothing in Ryan’s proposal looks to control costs, only to pare down the plans to make them more affordable.

I saw that and a few others while I was poking around, but stopped looking when I noticed one of the main sites had stopped being updated in 2014 (when ACA plans came on board.) I suppose we might qualify for NASE since we have rentals. I do wonder if more groups will get formed if the exchanges falter or go away.

I don’t have any answers, but I applaud your effort. There were a few years I wasn’t covered by employers before becoming Medicare-eligible, and they were huge money strains until the ACA came into effect. I hope you find a good option for group coverage.Gary @ Super Saving Tips recently posted…What Will a Fed Interest Rate Hike Mean to You?

I have no idea, but I love the concept – we desperately need to decouple group insurance from employment! I guess I wouldn’t be a welcome party to this group 😉 but I would be interested in seeing how to form a large group of people who were semi-retired and need decent health coverage.Revanche @ A Gai Shan Life recently posted…What are your home dealbreakers?

There are so many reasons that employment-based health insurance is a problem in the US… depressed wages, nonstandard offerings (including no offer), incentives to shift work to part-time, temp and contract workers, lack of portability, lack of price transparency, etc. It’s a mess, and I don’t know how it can really get fixed.

I wish I could help. I’ve always been covered by employer-sponsored coverage. I do need to start thinking about this longer-term. Maybe we can get a Blogger group discount?Brian recently posted…Mo Money, No Problems

AARP’s plan is only Medicare supplement, dental and vision (at least in Wake County.) It’ll be a while til that will be helpful.
AAA appears to have some discounts for Weight Watchers and a few other healthy living things, but that’s it.
The professional associations for certain small businesses may be the best option, since they are trying to fill in for employer health insurance, but right now I’m still trying to find a more general group like AAA or AARP. Thanks for the suggestions, though.

Before the ACA, most of the non-employer-based group insurances were dying off because of adverse selection death spirals. So famers insurance was disappearing, SAG insurance was disappearing, most small-business insurances were long gone, etc. Without the individual mandate you end up with healthier people deciding that they will take the risks without insurance, which means that only the sicker people are in the pool which drives up costs which makes the most healthy in the remaining group decide that they will take the risks and so on. Anything where it’s easy for people to decide whether or not to be in the group is going to be nonviable in terms of health insurance without the ACA or something like it.nicoleandmaggie recently posted…Saving isn’t necessarily “easier” for people who save more: A deliberately controversial rant

This is such an important topic and I really feel that the national conversation about healthcare has completely ignored it. Republicans keep talking about choice, but no one will ever have real choice as long as the the only decent insurance options come from employers. I have no choice about my insurance. But it is not the government choosing for me, it is my employer. Like most people with insurance, I get coverage from my job – I have no choice of any kind. I wish I could go on the market and choose my own insurance – I would gladly miss out on that tax benefit to have choice instead. Congress didn’t even pretend to have a conversation about all those people who are tied to jobs they don’t want to be in because of insurance. Obviously we dodged a bullet, but the issue is still an issue. People should be free to make decisions about working or not working, without it being dictated by the American insurance trap.

The employer-based system is so problematic, and no one seems to want to do anything about that. You’re right, as an employee you MIGHT get 2 plans to choose from, if you have a large employer. And many people feel trapped in jobs because of the huge gap between employer-provided and individual insurance. And if you complain about health insurance online, a popular response is, “Well, you should get a better job,” not “you should get better insurance.” ACA opened up a lot of possibilities for entrepreneurship, early retirement/semi-retirement, and other lifestyle choices.

No one is talking much about anything that will really drive the cost of health care down, only health insurance. NO ONE in government (not even the Freedom Caucus folks) is promoting price transparency, which is pretty much what any rational market depends upon. I do find it interesting that when people say “single payer won’t work,” they are comparing it to the (admittedly problematic) VA system rather than Medicare. But Medicare, with its supplemental insurance plans, works pretty darn well to provide reasonably-priced coverage AND choice.

I can see how spreading risk around in groups can help you achieve lower prices. Insurance is all about controlling liability after all. I was thinking about going into contract work, and a set-up like that might be cost effective in that scenario.